ROME, ITALY (1/15/98) -- Morena Pivetti's mother was a school teacher. Until she retired a few years ago, she devoted her working life to Italy's greatest and most-loved resource, its children. She was a dedicated teacher, and when she retired, she got one of the best pensions in Europe. Over decades, the social respect gained by Italian teachers has earned them the right to retire with full benefits after 20 years in the classroom.

Next year, however, these generous pensions will be history. Italy's new government of former communists says the country can't afford them any longer.

Pivetti defends the decision as inevitable, a price that had to be paid to keep the country's whole pension system afloat, while meeting the stiff budget-cutting requirements for joining the new Europe. "I may have to work ten years longer than my mother to get a pension," she charges hotly, "but at least I'll get one."

Pivetti is managing editor at L'Unita, the newspaper which held aloft the banner of class struggle in Italian politics for five decades, as the voice of the former Italian Communist Party (PCI). Every day she puts out another edition from a modern office filled with computer terminals, in a stylishly old building on Via Due Maceli, the heart of Rome's fashion district.

These days, though, L'Unita's take on class politics has changed. The paper prints columns by Robert Reich, the former U.S. labor secretary who counsels American workers not to fight the new global economy. Workers need to accept the price for keeping their nations competitive, Reich argues, even when their plants close and they have to change jobs many times.

Like a large section of the European left, many of Italy's former communists are attracted to Reich's politics of sacrifice. And for the first time in 50 years, since World War Two, Pivetti's comrades are in power.

Her Party of the Democratic Left (PDS), which anchors the ruling Olive Coalition, was born when the Italian Communist Party split in 1992, in the wake of the fall of the Soviet Union. The PCI's larger and more conservative wing formed the PDS. A smaller, more militant group reorganized itself as the Refoundation Communist Party, or Rifondazione.

Since Mussolini's downfall in 1944, Italy's communists have run many of its largest cities. But for 50 years, they were kept out of every national government, often at the behest of the U.S. Central Intelligence Agency. Now the old Socialist and Christian Democratic parties, which excluded the communists from government, no longer exist. Mired in the mud of corruption scandals in the early 1990s, they lost their credibility with voters and expired.

In 1994, in the wake of their dissolution, the PDS' Olive Coalition won the historic election which finally gave it a governing majority in the Italian parliament. But it's a very slim majority. The PDS depends on the votes of its old comrades in the Rifondazione. The hard-liners keep the PDS in power, but refuse to join its government.

L'Unita followed the PDS wing of the split in the old PCI. A daily with a huge circulation, it's been the envy of other western communist parties for years. The annual festival for the paper still draws over a million people. It is an institution, not just of the Italian, but of the European left.

Pivetti warns, however, that sometime this coming year L'Unita will lay off half its 300 workers. The "Mattina" editions, started to serve readers with local news in cities like Florence and Milan, will likely be discontinued. This can't help but be a bitter irony, not just to the papers' staff, but to millions of Italians who loyally supported Europe's most widely-read communist periodical through thick and thin. The PDS won the government, but they may lose the paper.

"The PDS can't carry the paper the way the old party did," Pivetti says. When the Italian Communist Party dissolved, party subsidies ended which had helped to pay L'Unita's bills. "Now we will have to make it on our own, just from sales, subscriptions and advertising," she explains. Whether the paper will survive in a chilly new market-oriented world is a question no one can answer. While it certainly has a loyal readership, it's hard to imagine department stores and big corporations paying for pages of ads.

The struggle over L'Unita's fate is just one reflection of a fierce debate raging through Italy and Europe, pitting the old values of social stability against the new ones of the marketplace. For the first time Italian workers have a government which they can justly feel in some degree belongs to them. Their unions campaigned for it and support it. Workers by the millions voted for it. One wing of the old party which was historically their voice leads it. Italian employers even attack it - the first national government they haven't liked since the war.

Yet the PDS is telling workers they must accept the bitter economic medicine required to join the European monetary union. Next year, a common currency, the Euro, will replace the mark, the franc, the lira, and all the old currencies of a select group of countries. These are the nations able to reduce their budget deficits to 3% or less of their gross national product.

To the conservative architects of this new Europe, that goal can only be met by cutting government subsidies for health, housing, education and pensions. At the same time government revenues must also be boosted, they say, by selling off the vast network of nationalized enterprises, from airlines, telephones and power plants to steel mills, ports and railroads. Meanwhile, high unemployment and contracting-out must be used to attract investment by keeping labor costs down and profits up.

These are the rules of a bankers' Europe, written in corporate boardrooms. For five decades, their authors have fought all the social legislation won by European unions and leftwing political parties. These conservatives consider the extensive network of social benefits enjoyed by Italian workers, like Pivetti's mother's pension, an historic mistake.

But now the bankers must rely on the PDS, successor to Italy's old communist party, to find a way to keep Italian workers from gagging on their bitter economic medicine.

In the U.S., it took a Democratic president to successfully sell free trade and welfare reform. In Italy, only part of the left can sell the prescriptions for a united Europe to those who might be counted on to oppose them.

It is a fight, however, far from over. Two years ago, Italy was the only major country in western Europe where voters had rejected the conservative wave of the 80s and early 90s, and voted for the left. Then the French rejected the austerity of the Plan Juppe in giant strikes, and followed by voting in a Socialist government at the polls. On their heels, this fall British voters finally swept out John Major, the heir of the queen of European conservatism, Maggie Thatcher.

No one predicts that the election of these left governments will halt the process of economic integration. None of the new parties in power even advocate such a course. The question they face is: how many of the social benefits achieved by workers since World War Two will survive European integration?

To the PDS, Italy's prosperity won't survive if it isn't included in a united Europe. Italians have something to lose, Pivetti argues. "When I was young in the 60s, only one family in my apartment building had a black-and-white TV, and we all rode the busses and subways. I came to New York, and all my friends had a color set, and a car. Now I'm better off than they are. If we can't keep up and join the European club," she sighs, "we'll be left like north Africa - a third world country."

But prosperity has its underside.

Unemployment in Italy is over 12%. The same is true in France and Germany. In Britain, where Thatcher cut the power of the unions, unemployment came down. But Britain's new non-union jobs overwhelmingly pay much less than the union ones which disappeared.

Creating lots of low-wage jobs is part of the bankers' prescription. European conservatives have adopted Reagan's trickle-down rhetoric, that only increased subsidies to business and relaxed labor protections can produce high profits, tempting businesses to hire more workers. They eagerly accept the U.S. media's glowing accounts of American economic success. The "hard-capitalist" U.S. economy "skips along," according to European Newsweek writer Richard Ernsberger, while the "the over-regulated welfare state that is Europe" only produces unemployment.

This vision is shared by some parts of the left as well. Following his election, Britain's new Labor Prime Minister, Tony Blair, announced he wouldn't roll back Thatcher's privatization of British industry, or lift her harsh restrictions on unions.

Millions of Italian, French and British workers, however, expect their new leftwing governments to bring down unemployment, while protecting their hard-won social benefits. French workers shut their whole country down two years ago to save their pensions and free health care. Italian unions threatened to do the same thing last year to stop threatened pension cuts.

Some elements of the left go even further, demanding that governments move beyond preserving past benefits to winning new ones.

Under leftwing and union pressure, France's new Socialist government called a European conference on unemployment in late November, to set goals for reducing unemployment. Its proposals were derided by conservative German Chancellor Helmut Kohl, whose party will likely lose at the polls next year. Kohl announced even before the conference opened that "we will make no decisions which require additional funding," in other words, no government-funded jobs programs.

In Italy, the debate came home with a vengeance in September, when the PDS government announced a budget which included pension cuts and no new measures to fight unemployment. The Rifondazione announced it would vote against the budget, and threatened to bring down the government.

Ramon Mantovani, a party deputy responsible for international affairs, explained their side of the fall crisis. "We asked the government to make an advance, especially on unemployment. We wanted reforms, not just to defend what already exists."

In particular, Rifondazione wanted the workweek reduced from 40 to 35 hours, a demand supported in the past by virtually every union and progressive party in Europe. Shorter hours, it claimed, would force large employers to hire additional workers. When the PDS didn't respond, the Rifondazione withdrew its votes.

In a strange twist of historic positions, the PDS and Italy's leftwing labor federation, the General Confederation of Italian Workers, objected to shortening the workweek. Most unemployment is in the south of the country, they pointed out, where the rate is over 25%, and where the absence of large industrial employers will limit the proposal's impact.

In the end, however, the government blinked, and reached a compromise. The Rifondazione won the 35-hour workweek, to be implemented over the next five years. Manual laborers and people in physically demanding jobs will be exempted from a new, higher retirement age. "When a young person can't get into the labor force, because his or her father or mother has to stay 4 years longer just to earn a pension," Mantovani charged, "it doesn't make sense to boost the retirement age."

Government privatization plans continue, however. Next on the auction block are Italy's banks and railroads. Selling them off will undoubtedly provoke another wave of layoffs, as new owners seek to boost profit margins by trimming the workforce. One PDS economic analyst speculates that some unemployment could be absorbed by new tourism development projects. But while the tourist industry is growing, it generally provides very low-wage jobs.

Nevertheless, Italy's more militant left came away feeling that it might yet be possible to turn back the tide of concessions. "It was a big achievement," Mantovani crowed, "the first time in 20 years that we've been able to impose limitations on the market. For the last two decades, the market has been able to eliminate rights and social benefits we achieved years before. Now we think it's possible to speak of another Europe, not just one of the market and of profit, but a social Europe, a people's Europe."

Being militant has paid off in elections. Rifondazione only won the votes of six out of every 100 young people between 18 and 25 in 1992, it's first foray on the ballot. By 1996, it had increased its showing to 22% of that crucial age group.

In reality, Rifondazione is no more the model of an old-style communist party than the PDS. It calls for legalizing drugs to stop the illegal drug trade. Italy's first openly-gay deputy, Nikki Vendola, is a Rifondazione member, and vice-chair of the parliament's anti-mafia commission. Together with the PDS, the Rifondazione has passed legislation allowing immigrants to enter Italy to look for work, and giving them the right to vote in local elections.

The monolithic European left, if it ever really existed at all, certainly doesn't any longer. "There is no Communist movement internationally anymore," Mantovani said, with little apparent regret. "There are two lefts in Europe now. One accepts globalization, and wants to direct it. The other wants to leave that system, by reform or other means."

For over a century, the idea of a socialist alternative provided the glue which held the European left together, and the strength and unity needed to achieve even more limited reforms. Without that common vision, it's become very difficult even to agree on a direction.

The left may have new power in Italy and Europe, but the new world order has it deeply divided.